The highly convenient Buy Now, Pay Later (BNPL) model has witnessed frenzied success on an international level. Australian-based Klarna has captured almost half of all BNPL users, and Visa and Mastercard are duking it out in nearly every continent to grab users loyalty.
Interestingly enough, however, the trending tech is met with slight hesitation in the US where the reign of credit cards remains strong.
Despite this, companies breaching achievements overseas have begun to export their products to the US, with hopes of being the one to crack the financial nut that is America’s BNPL space, and hopefully, spread its service adoption stateside.
Case study: Zilch
UK-based Zilch is one such player.
In an interview with FinLedger, the company plans to kickstart expansion through its acquisition of Neptune Financial (NepFin). With it, Zilch gains a base begin tackling each states individual regulatory roadblocks, which bar many companies from expanding in one of the world’s mort profitable financial market.
“There’s a lot of things that can translate well, but we want to make sure that because this is a different market as well, you’re being thoughtful around addressing that directly,” said Al Periu, who is joining Zilch as the company’s US CEO and serving as founder and CEO of NepFin told FinLedger. “So you need people on the ground here. And we’re excited to scale that team, which we’re spending a lot of time doing right now.”
Zilch uses a slightly alternative approach to the familiar BNPL model. Instead of reaching out to businesses and merchants one-by-one to offer its services, the company utilizes an over-the-top business model which creates a direct relationship with consumers. The platform allows customers to shop freely, and spread payments over six weeks with zero interest or fees.
Zilch CEO Philip Belamant says that because the platform is directed to consumers, not merchants, they have more responsibility to look after those customers.
“We believe it’s our responsibility to look after that customer, and therefore, we think we should operate in a regulated way because the regulation provides protection. That’s why we were one of the first to get a consumer credit license in the UK, and still today are one of the only providers that have one. And for the US, we are actually doing this exactly the same way,” Belamant said.
The BNPL company’s method has been successful in the UK, with over 150,000 new customers being added per month.
Belamant echoed Periu’s sentiment of a thoughtful, targeted approach to US expansion, saying social media has helped them build out their target audience and plan a more strategic acquisition-expansion approach.
“Social media provides us with phenomenal tools to look at audiences, so we can match behavior. We can use that science to really target how we come to the market,” he said, mentioning how Zilch sees the differences and similarities between UK and US consumers.
“We have a phenomenal engine that really allows referrals and uses all that data to take a look alike audiences and retarget, so what we really going to focus on with us is this approach. So what’s different? We are all people, right? Nothing’s really different.”
BNPL buys now
So Zilch’s BNPL method is different, the customers are different — which begs the question: how is the company’s acquisition-based expansion different?
Instead of creating a US subsidiary company from scratch, Zilch has acquired NepFin and is using the former company’s bones as a vehicle for its expansion. Belamant says that experienced US leads and locality are important differentiators in the move.
“Al and Tom (Meister, COO and General Counsel of Zilch’s US side) are seasoned veterans and experienced in this game. They’ve seen this movie quite literally before, because they helped funding circle come from Europe to the US, and really helped to drive all of that,” Belamant said.
“Frankly, they have seen what you should do and a lot of what you shouldn’t do, and so we’re going to use all of those learnings to make sure that we create a beautiful product that people locally want to use and love.”
Explaining those issues that often cause problems for really any company trying to expand into the US, Periu says that going into the states without a regulatory plan is a huge pitfall many companies succumb to.
“Thinking regulation is something you can think about after the fact doesn’t work. ‘Oh we’ll figure that out later’, there’s still a little bit of that mantra in the Silicon Valley. The mindset of ‘move fast and break things’,” Periu said.
“I would say not everyone is as thoughtful as we are in our approach. They think ‘we’ll just sort it out later’, and these are things that you truly do not want to be sorting out later. Because you’re dealing with, again, consumer lending.”
Belamant told FinLedger that the BNPL player is almost at one million customers in the UK after a year of full operations, and are now hyper-focused on getting live in the US so they can have a big marketing and adoption year in 2022.
“We’ll be well into the millions here in the UK of customers by the end of the year. We want to be live in the US and ready to absolutely fly through 2022. So ’22 for us is all about the US, that’s the big goal.”
Zilch’s customer-based approach and US expansion is notable, of course, when contrasted with BNPL giants such as Klarna and Affirm, who are more merchant-focused and are also in the midst of their own journeys into the United States market. Klarna just hit 20 million US customers and a 77% increase in gross merchandise volume since last year, and Affirm announced a partnership with Amazon over the weekend.